Storage Start-Ups in 2013

In 2013 we counted 58 investment rounds initiated by 57 storage start-ups, a small number.

It was 77 in 2012 and 66 in 2011, the record being 78 in 2005. This decrease last year is not really bad news for storage, still one of the most dynamic sectors in the IT industry, continuing to be appreciated by VCs that dream of what got some of them following the acquisitions of firms like 3par, Data Domain and Isilon few years ago at more than $2 billion, or few successful IPOs.

But the investors in these latter three start-ups were lucky as generally most of them have to invest in several new ventures to finally win the jackpot.

NUMBER OF FINANCIAL ROUNDS SINCE 2003

 (Source: StorageNewsletter.com)

Fewer New Start-Ups
More worrying is the reduced number of start-ups founded since the heydeys of 2000 when 96 new entities sprang up in a single year. We were only able to turn up 5 new firms launched last year vs. 18 in 2012 and 34 in 2011, while these figures will go up as more of them, operating in stealth mode, come to light.

NUMBER OF STORAGE START-UPS LAUNCHED EACH YEAR SINCE 1996
(when the born year is known)

 (Source: StorageNewsletter.com)

How Much Do They Raise?
21 firms raised more than $20 million in 2013 (27 in 2012 and 16 in 2011). Pure Storage tops the list with with $150 million. Last year the record was $125 million for Box.net. Cloud and SSD were really exciting the investors last year.

LARGEST FINANCIAL ROUNDS IN 2013
(at more than $40 million)

*  Correction: Line added on January 9, 2014
(Source: StorageNewsletter.com)

If we take into account here the total funding of start-ups, all rounds aggregated, Pillar Data was historically the most financed company, with about $544 million from Larry Ellison, CEO of Oracle that finally acquires the storage subsystem provider. After that comes Box with $404.5 million, Dropbox with $257 million, Pure Storage with $245 million, and BlueArc (acquired by HDS) with $224 million.

No More Record Year in Financial Funding
2013 was not another record year in the global amount received by storage start-ups considering here only the sums revealed by the companies: $1.291 billion invested. It was $1,432 million in 2012. It’s the first time this amount is going down since 2009. But the average amount per round continues to increase, also since 2009, this time by as much as 20% year to year. In brief investors put more money in less start-ups and consequently in less rounds.

These past eleven years, VCs have put $17.2 billion in storage start-ups. This amount is much higher than the total figure in the table below ($10,738 billion adding all rounds) because, for several firms, we got the total invested but not the details per round.

On average, a company got historically $39.7 million in total funding, the average per round being $14.3 million.

* in $ million
 (Source: StorageNewsletter.com)

Where From?
It will come as a surprise to no one that storage start-ups are for the most part (around three-fourths of the total) headquartered in the U.S., even if occasionally the actual founders hail from another country originally (typically India or Israel). Far behind are UK, France, Canada and Israel. Apart America and Europe, the two other continents, Asia and Oceania, are not well represented at all.

WHICH COUNTRY DO THEY COME FROM?
(out of 409 active start-ups)

 (Source: StorageNewsletter.com)

Where Are They Going?
The last thing we looked at was what becomes of all these storage start-ups after we identify and count them. The conclusion is not really reassuring, a reminder that investment in these sorts of companies is in fact highly risky. And that’s just taking those we know about.

On all start-ups identified, only 3% eventually go public, and thus allow investors more than just to recoup their original stake. The same is generally true for the 27% that find buyers, although the asking price is not always greater than the total of all sunk investments. It is, in any case, the emergency exit that most companies are seeking, certainly more than the increasingly elusive IPO. Meanwhile, another 18% just vanish off the map – doors closed.

50% all start-ups of them remain in a holding pattern, still a start-up, still nursing the secret hope of an offer from a storage giant seeking to fill-in a missing technology.

WHAT HAPPENED TO THEM SINCE 1978
(out of a total 794 start-ups)

 (Source: StorageNewsletter.com)

11 start-ups did find buyers in 2013 and 21 in 2012, the biggest deal last year being Virident acquired by Western Digital for $685 million. In 2012 it was XtremIO by EMC for $430 million, both of them around SSDs.

There were three IPOs in 2013: Violin Memory now in trouble, Nimble Storage and Barracuda Networks. No one was filed with success in 2012. But this figure last year is not so low and proves that the stock exchange finds some interest in storage when we learned that for all activities in USA (not only IT), there was no more than 82 IPOs in 2013 for total amount of $11.2 billion or an average of $137 million, according to Thomson Reuters & National Venture Capital Association. Average for the three new public storage firms was $135 million.

Few start-ups are going to file for IPO this year. Box is not far to become public. Pure Storage wants do do it. Coraid could be also on the list as well as Tintri in 2015.

IPOs IN STORAGE INDUSTRY

* in $ million
** became public via a merger with Network Peripherals
(Source: StorageNewsletter.com)

START-UPS ACQUIRED IN 2013

*in $ million
 (Source: StorageNewsletter.com)

NEW START-UPS (known thus far) BORN IN 2012 …

 (Source: StorageNewsletter.com)

… AND IN 2013

(Source: StorageNewsletter.com)

ALL FINANCIAL ROUNDS IN 2013

 Note: Funding in $ million
**  Correction: Line added on January 9, 2014
*** Correction: Line added on November 12, 2014
 (Source: StorageNewsletter.com)